For big delivery, restaurants were just the beginning
(Is that a good thing?)
On Tuesday, Uber announced a partnership with Gopuff, an on-demand delivery startup. According to a Bloomberg report, “GoPuff will make inventory of convenience store and grocery items available to Uber customers in 95 cities starting next month and nationwide by the end of the summer.” Gopuff handles the so-called “hyper-local” logistics and delivery, Uber takes a cut of each transaction made through its app. (Sounds familiar!)
Late last month, The Information reported that Gopuff more than tripled revenue last year to $340 million, and this year expects to reach $1 billion in revenue. It runs micro-fulfillment centers with a select offering of convenience items — cleaning products, pet products, baby products, food, and even alcohol — that it delivers to customers quickly.
This is not Uber’s first big move into groceries. In 2019 Uber acquired Cornershop, a grocery delivery service operating in Latin America. (Mexico blocked a previous Cornership acquisition attempt by Wal-Mart but approved Uber’s takeover last year.) This week’s announcement demonstrates how the biggest companies in the delivery space are going to get even bigger.
Uber and DoorDash are in an arms race of sorts, building last-mile delivery logistics and software to support those efforts. After years of growth-at-all-costs, Uber has been turning to M&A (that’s mergers and acquisitions) to grow. Last year Uber acquired rival delivery service Postmates for $2.65 billion; earlier this year it bought on-demand alcohol delivery company Drizly for $1.1 billion. This strategy is unsurprising given the company’s leader; Uber’s CEO Dara Khosrowshahi arrived at the company from the Expedia Group in 2017 with a history of making big deals. According to Pitchbook data, Expedia completed 15 acquisitions under Khosrowshahi’s watch, including HomeAway, Ortbitz, Travelocity, and Trivago.
Of course, Uber + Gopuff is a partnership, not an acquisition, but gives Uber much needed scale and speed in the hot grocery and convenience delivery market. Gopuff competes on speed; Uber markets itself on coverage and scale.
DoorDash, meanwhile, has been promoting its own grocery and convenience offerings, including that Super Bowl commercial featuring the Sesame Street muppets and a version of “These are the people in your neighborhood” that was a little different than I remember from my childhood. It introduced DashMart, “a new type of convenience store,” last summer. It offers typical convenience-store items but also some higher end and limited-edition exclusives. (For example: this week, DoorDash is offering on-demand Mother’s Day gifts, five exclusive self-care bundles from Jo Malone and The Honest Company.) This model lends itself conveniently to all sorts of collaborations and product drops from celebs and brands looking to make a national impact.
Give all this, and what we know about the economics of restaurant delivery, might these companies put restaurants on the proverbial back burner as they chase profitability? On one hand, these companies are becoming large enough to create dedicated teams for each facet of the industry. On the other, their restaurant delivery strategies have still left them largely unprofitable even under the most favorable market conditions. Are restaurants to Uber what books were to Amazon?
DoorDash just released new options and pricing for restaurants; Uber just built restaurant pickup into its rides app which seems pleasingly efficient. But the promise and speed of grocery and convenience of delivery — not to mention the huge amounts of money pouring into the space — might make it a more attractive growth vector than specifically courting restaurants, especially now that the pandemic is waning and we’re all far more excited to get out there.
In Eater this week, San Francisco restaurateur Sara Deseran penned a piece about how delivery has changed restaurants forever — or at least for the foreseeable future. Diners have adjusted their expectations, she writes. “Their priorities have shifted to the point that they now conceive of a restaurant less as a place where you go for community and more as a facility that supplies dinner.”
Big delivery companies have clearly disrupted the way many restaurants operate. I can’t help but feel they’re taking the W and moving on to what’s next.
New study calls out artificial demand in food delivery
Numbers from a study published last week suggest that much of the demand for third-party delivery in 2020 came because of Covid restrictions. Sales on delivery apps passed $50 billion, but as much as 69 percent of that demand is artificial and will likely evaporate. The study tracked 27 different delivery apps and is based on five years of credit card spending data from Earnest Research, a data analytics firm that tracks card spending that culled data on 1.8 million consumers for the report, according to a report in the New York Post.
What else is happening?
Square delivers booze now. Well, not directly, DoorDash or a business’s own courier delivers the actual booze. But new functionality for the commerce platform allows merchants (like, say, craft breweries or wineries) to sell alcohol for delivery from their websites in “select states nationwide.” Buyers pay a flat fee of $1.50 to Square and a delivery fee to DoorDash. Here’s more from Square. When I shared this news on Twitter as it broke on Wednesday morning, Seattle chef Eric Rivera (known for, among other things, his successful business pivots and tech savvy during Covid) called it “a game changer” in response.
DoorDash explores European expansion. In its IPO filing, DoorDash said it would look to expand internationally. Now, Bloomberg reports, it’s looking for acquisitions abroad in restaurant and grocery delivery — Germany and the U.K., especially. (You’ll remember a few weeks ago Uber Eats announced it would expand into Berlin and Just Eat Takeaway’s CEO had *thoughts* about this and shared them with Uber’s CEO in public on Twitter.)
The Federal Trade Commission wants to crack down on “dark patterns.” That is, designing products (apps and websites, mostly) to trick users into performing a certain action. Per a piece in Protocol, think: Oversized “accept” buttons, fine print containing hidden fees, or language intended to make goods or services look scarce, i.e., “150 other people are looking at this now.” Kat Zhou, a designer at Spotify, spoke virtually at an FTC event and described how practices like companies prioritizing growth over all else contribute to the problem. Lots of interesting thoughts here, and worth thinking through how regulation in this space might change the way we interact with restaurants online.
If you’re going to write a goodbye note on Facebook, this is the one. I was personally sad to learn that San Francisco’s 20th Century Cafe will close permanently. “I’ve been through a lot, I know we all have, and I dragged my half dead body in here week in and week out and made the best damn food I could for years, pushing myself so hard, every day, but enough is enough,” wrote chef-owner Michelle Polzine.
Eater SF has more: 20th Century Cafe closes permanently after eight years of grand pastries
To my fellow parents of small humans, you’re doing great. This essay on dining out with my young daughters was a delight to write for Resy. I hope you enjoy it.
Applications are open for the Restaurant Revitalization Fund, the $28.6 billion fund for food businesses affected by the pandemic. For Food & Wine I spoke with SBA Administrator Isabella Casillas Guzman about the fund and why all business owners should apply now. (According to new data from the Independent Restaurant Coalition, 186,200 restaurants, bars, and other eligible businesses applied in the first 48 hours.